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Daily Market Update – December 15, 2015 (Close) Yesterday was a very interesting day. It was really a roller coaster all day, but unlike most rollercoasters, which end on the downslide, yesterday’s market ended on the upside. Yesterday the futures started strongly but lost strength heading into the open. Then the market opened to a rally, lost steam, rallied, lost steam and then finally re-discovered itself in the final 30 minutes of trading to close more than 100 points higher. Not bad. Confusing, but not bad, as it was another day with no real news. This morning’s futures opened strongly and actually built strength as the pre-open session wore on. Although the market ended up closing about 100 points below its high for the day, being up 156 points isn’t too shabby. All of this happens as the FOMC begins its 2 day meeting today and woe is to the market if it ends up not raising interest rates. Especially since all experts are now of the belief that the rally is an embrace of finally getting this “will they or won’t they raise rates” ordeal over with. Everyone is expecting that rate rise to come tomorrow and in the very small chance that it doesn’t, it will only send a message that the economy isn’t even strong enough to bear the burden of a 0.25% rate increase. On the other hand, if the FOMC surprises in the other direction and actually raises rates by a very unexpectedly high 0.5%, which used to be the norm, the market would probably have the equivalent of a stroke. The fact that it was rallying this morning coming off yesterday’s late rise and it was more or less able to keep that momentum going throughout the day today should mean that people are again ready to embrace the idea that an interest rate hike reflects a good economy. The behavior of traders, though, from the time of the Employment Situation Report until last Friday is fairly odd, as you might have expected that if there was going to be a sell-off it would have come around the time of the actual news becoming reality. Instead, it seems as everyone wanted to get a jump on everyone else and sell before the news became news. That itself may be the makings of a new norm as increasingly we’re even seeing reactions to technical levels before the levels are being hit, as everyone is looking for an advantage over the next guy. That’s as old as mankind itself, but after a while if that continues, you probably have to start re-writing the rules of trader behavior and add institutional reverse psychology into the mix. With one purchase yesterday I wouldn’t mind some continuing strength for the week, including strength coming as a result of the FOMC’s decision. I’d love to have the opportunity to get some assignments or to even have an outside chance at some rollovers. That wasn’t looking very promising yesterday, but now isn’t necessarily totally out of the question, particularly if some longer term option expirations are considered, as was the case with some of those set to expire this week. There were a number of those that I put feelers out for today, but none of those trades got made. Maybe tomorrow. I had been expecting to be mostly watching today, but I would take any opportunity to capitalize on continued strength if it can maintain itself. The lesson learned from last week was to definitely take advantage of that strength because it can’t necessarily be guaranteed to maintain itself. |
